How Inequality Found a Political Voice

It took a long time for widening inequality to have an impact on politics, as it suddenly has done in recent years. Now that it is a central issue, national economic priorities will need to shift substantially to create more equitable, inclusive societies, or electorates could embrace explosive political alternatives.

MILAN – It took a long time for widening inequality to have an impact on politics, as it suddenly has done in recent years. Now that it is a central issue, national economic priorities will need to shift substantially to create more equitable, inclusive economies and societies. If they do not, people could embrace explosive alternatives to their current governments, such as the populist movements now sweeping many countries.

Political leaders often speak of growth patterns that unfairly distribute the benefits of growth; but then they do relatively little about it when they are in power. When countries go down the path of non-inclusive growth patterns, it usually results in disrespect for expertise, disillusionment with the political system and shared cultural values, and even greater social fragmentation and polarization.

Acknowledging the importance of how economic benefits are distributed is of course not new. In developing countries, economic exclusion and extreme inequality have always been unconducive to long-term high-growth patterns. Under these conditions, pro-growth policies are politically unsustainable, and they are ultimately disrupted by political dislocations, social unrest, or even violence.

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Advisory Board Co-Chair of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.

The English-language
publication of Thomas Piketty's "Capital in the Twenty-First
Century" has sparked widespread debate over the causes and
consequences of rising inequality. Is Piketty's analysis mere
fodder for professional economists, or will it move
policymakers to act?

An additional point that I think is relevant: economic inequality is only one form of inequality. If laws apply to some people and not to others, that is a different form of inequality. The main examples that are quite obvious to many are the baillouts of financial institutions with FDIC money used to cover non-FDIC insured accounts and the lax enforcement of laws with respect to the Clintons and other elites. If you look at the verdict against Martha Stewart (obstruction of justice) and compare that to Hillary Clinton bleaching a computer hard drive that was under subpeona, it becomes very obvious that laws do not apply to some people.

This is also the source of the disconnect betwen Occupy Wall Street and regular folks: OWS focused on people who have money, not people who are beyond the law. These are not always the same people.

It was a pleasure to read your well-reasoned and beautifully-written essay. I agreed with every word of it.

Now, what to do about inequality?

In the U.S. inequality will continue apace, until the day the Reagan and G.W.B. tax cuts are repealed.

It was the Reagan-era tax cuts that spurred America's economy and allowed the U.S. to (then) have more billionaires than any other nation on the planet -- and with billionaire owners, came unprecedented and global, economic and social clout.

For those reasons, the Reagan-era tax cuts were the right thing to do -- at the time.

However, the tax cuts enacted by both the Reagan administration and the George W. Bush administration have reached a point of diminishing returns, and indeed, have become toxic to the U.S. economy. I say again, that they were the right economic medicine for the times, but are no longer the right medicine.

The 1% are wholly a creation of the Reagan-era tax cuts, and the G.W.B. tax cuts only added to that trend.

But, in practice, now what happens with the 1% is that they either plop their money in the bank (which does nothing positive for the economy) or they invest it in Asia (which, for sure, does nothing positive for the economy)

In effect, those tax cuts sucked money upwards to the 1% -- who then took all those billions and invested them outside of the U.S., or left it to sit in U.S. banks, doing nothing productive.

In total, trillions of dollars have left America since the mid-1980's, and pointy-heads are trying to figure out what's wrong with the American economy!

I don't blame President Obama, as he was busy getting us out of two wars, walking us gently through the 2008 crash, fixing the economy, repairing our relationships with many countries, and passing a national healthcare plan. Not bad, even by Presidential standards!

But if the next U.S. president doesn't fix it, inequality will be with us forever. There simply isn't time for lollygagging.

Right now, the 1% own more than half of the world's wealth -- but by 2030, the 1% will own three-quarters of the world's wealth!

In 2030, how will 8.5 billion people live... on only 25% of the world's total wealth?

World Wars have begun, over less.

Job #1 for the next U.S. President, must be to repeal the Reagan and G.W.B. tax cuts, and tax any money that leaves the U.S. -- which (the 'leaving' money) strengthens our competitor nation economies and weakens the U.S. economy!

"In the United States, rising inequality has been a fact of life at least since the 1970s, when the relatively equitable distribution of economic benefits from the early post-World War II era started to become skewed."

In the post-WWII era, the distribution of benefits was skewed towards the United States. America's share of world GDP peaked in the 1950's and has been declining ever since. This graph shows U.S. GDP as a percentage of world GDP over time:
https://infogr.am/Share-of-world-GDP-throughout-history
From the end of WWII on other countries gradually became as safe a place to invest as the U.S. and investor's willingness to pay well above world norms for the same labor available elsewhere also declined. No "concern about inequality" troubled most Americans at the time who were making more than equally qualified people living elsewhere. Complaining about "inequality" is frequently just a way of complaining about someone else having more than oneself without being too obviously motivated by one's self interest.

First, Piketty's book is BEFORE TAXES AND TRANSFERS. It ignores all the money the US's rich give to the US's poor every year. It provides good data, but as a revelation of unequal quality of lives, it's irrelevant. Second, all data on inequality ignores all of the quality of life benefits the US's poor get for free ... medical care ($$$), clean water, military, police, fire protection, public libraries, highways, subsidized public transportation, garbage disposal. The poor in the US are not the poor in the poorest parts of India. The US's poor would be in the top 2% globally, all things considered. For the first time in history obesity is problem the poor have, not the rich.

But most importantly, in the US, there is an anti-education culture that the poor embrace while quite the opposite there is an enthusiastic embrace of education prevalent among the rich. Of course, with globalization and technological developments, education leads to income levels. Yet Democrats continue to wreck our education system for the political contributions it yields ... and continue to blame Republicans and taxpayers when they are doing their part while the poor continue to forsake education ... and responsible procreation, and a variety of behavior conducive to economic improvements.

But very importantly, Piketty focuses on the West. But, globally, inequality has dropped precipitously BECAUSE of capitalism, relatively low taxation, and globalization. Things are getting better, not worse. I realize this means social justice requires more capitalism, lower taxes, and more globalization; but because that's not the agenda of certain ... "experts" it's slandered and smothered ... and the poor suffer the worst because of it.

The services the poor get for free in America pale in comparison to the services the rich get for free:
- no taxes
- free bailouts
- lower labour costs as jobs moved to China
- free money (via fractional lending/QE via bank loans)
- ability to change the laws (via lobbying)

Cogent, Mr Chris Hart. I hate to agree with your assessment of the poor in the US. But, how are the democrats wrecking our education system? Could you be more specific? Are you against public education?

In Science (of all places) Saez and Picketty concluded, "There are powerful forces pushing alternately in the direction of rising or shrinking inequality. Which one dominates depends on the institutions and policies that societies choose to adopt."
(See:http://eml.berkeley.edu/~saez/piketty-saezScience14.pdf)
Now, see: https://www.youtube.com/watch?v=uo84caBoToQ - (imagine the second 'coptor is full of money).

A very good article from my point of view -- although the concluding notion that "social media" is somehow going to displace money in our political processes (in the U.S. anyway) seems totally unrealistic. It's going to take an act of will on the part of current political leaders to close the door on Citizens United, place limits on our ridiculously expensive electoral process (which lasts far too long and costs far too much). and somehow constrains influence peddling at all levels of our system.

In passing, "inequality" is I think just one manifestation of distributive injustice, both nationally and globally .

Anarchy must never be the alternative - Arab springs produced no real solutions yet.
Alternatives that can overcome Inequalities - is the reason we have democracy.
Dollarized Democracy has not been able to address shortcomings - alternatives long overdue.
The Media was supposed to be the channel to challenge the shortcomings.
Dollarized Media instead replicated The evils that the Political Party System foisted.
The advent of Digital Democracy is Hope that Populism remains unadulterated by Dollars.
What we have to guard against is the inevitable Dollarized Digital Democracy that is in store.
Populist anarchists best avoidable - perhaps with unadulterated Digital Democracy.
The participation of numbers increases the possibility of creative genius flowering.
Not for creative destruction - but for articulation of the best options possible.

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